“Google Tax” in Ukraine

by Olha Povaliaieva
Wednesday, January 12, 2022
“Google Tax” in Ukraine

On January 1, 2022, the document fully entered into force, which introduces European norms and obliges international Internet companies to pay 20% VAT

The law stipulates that non-residents will be included in the list of registered persons as VAT payers in Ukraine. Registration of the payer will be simplified and remote (on a specially designed web portal). Thus, internet giants will pay VAT instead of Ukrainian companies.

According to the law, the following electronic services are subject to taxation:

  • Supply of images or texts;
  • Delivery of audiovisual works, video on demand, games;
  • Providing for use "clouds" for hosting data;
  • Delivery of software and updates to it, as well as its remote maintenance;
  • Advertising on the internet, mobile applications, and other electronic resources.

At the same time, corporations will not pay 20% VAT to provide electronic educational services.

The head of the parliament's financial committee, Danylo Hetmantsev, noted that this law would not affect ordinary users in any way. After all, services such as searching on Google or using social networks will remain free.

"The so-called Google tax introduces a simple VAT mechanism for multinational corporations providing e-commerce services. These are Facebook, Netflix, and Viber. They have to pay tax in Ukraine, as well as in over 80 jurisdictions around the world," Danylo Hetmantsev.

Not all Ukrainian companies cooperating with internet giants are VAT payers. This could potentially lead to an increase in the cost of internet services. In particular, Facebook sent messages to accounting business account owners about a 20% mark-up from January 1, 2022. This will affect customers who are not VAT payers. If a company provides a VAT ID, Facebook will not add VAT to ad purchases. Google sent out a similar message.

We remind you that the law of Ukraine On amendments to the tax code of Ukraine regarding the abolition of taxation of income received by non-residents in the form of payments for the production and distribution of advertising and the improvement of the taxation procedure with a value-added tax on transactions of delivery of electronic services by non-residents to individuals dated 03.06. 2021 № 1525-IX entered into force on July 2, 2021.

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